EHS Strategy & Management Quarterly

Welcome to the inaugural issue of EHS Strategy & Management Quarterly ! Our aim is to continue the strong tradition of our former Ask The Experts column, while bringing you more practical solutions and more in-depth analyses of key topics. This issue is being sent to you because you were on the list to receive the monthly column.

Over the previous 5 years of the Ask The Experts column , we've covered many of the different EHS organizational structures (centralized, decentralized, hybrid and shared services being the primary types) and a few of the advantages of each one. One type of organizational structure is what I call a “Matrix Team”, a modified hybrid structure that is meant to encourage staff interaction between the various tiers in a major company's EHS organization – central, business/divisional and site.

In essence, teams are set up to manage specific programs like waste management, process safety, etc. on a team basis across company's EHS organizational lines. All organizational levels participate in major initiatives and internal EHS audit staffing is done with a common full-time audit team leader; auditors are pulled from a cadre of corporate, divisional/ business and site staffs. Representatives from the latter two organizations participate on audits of the other divisions/business units and sites to a) avoid conflict of interest and b) increase those persons' knowledge of other units' facilities, operations and EHS practices.

A few months ago the senior EHS executive of a major U.S. company asked me about this form of organizational structure prior to presenting it to the company's executive board for approval and implementation. While a Matrix Team organizational structure has certain advantages and synergies, it can quickly flounder, confusing everyone at best and leading to decreased performance, internal turf battles and ruined careers at worst. I advised him that these downsides can be prevented by being aware of the potential organizational and operational hazards of such an organizational structure and taking steps to prevent or minimize them PRIOR TO THE REORGANIZATION.

Here are three of the pitfalls, and preventative solutions, common to a Matrix Team organizational structure:

 Confused responsibilities and authorities. The biggest downside to any matrix-based organizational structure is that there are fewer distinct lines of responsibility and authority. Everyone either believes that someone else is responsible for a certain aspect, or purposely presumes that someone else is responsible – they don't want to create the additional work that comes along with the responsibility. This is the primary reason why Mark Hurd, Hewlett-Packard's new CEO, ditched HP's matrix team organizational structure.

Responsibilities must be inventoried, authorities must be clearly stated and teams must be allowed to operate within those parameters. Matrix team members must confirm those responsibilities and authorities with their own respective organizations, too, to ensure they have the proper and necessary internal support. It's tough to have two bosses!

 Budget battles . Don't be surprised when site and business units resist having their staffs participate in team activities while staying on their respective payrolls. The budget must accommodate the time that those people work on projects and initiatives outside their respective businesses' or sites' specific needs, despite “the common” good. This can be accomplished by shifting at least a portion of, that budget cost (including travel!) from the business or site to the corporate department.

 Conflicting objectives – both written and hidden. Nothing's worse than having a team member working on a company's ‘no non-compliance' objective when his or her own organization has a hidden ‘no major non-compliance' objective. That puts the person in a lose-lose, career-ending, situation.

BASF dropped its matrix-based EHS organizational structure last year.

Also, don't forget professional development! Such situations can create opportunities to see others in action, accept responsibility and increase their experience. While staff personnel need to know that positive participation can lead to promotion, recognize that a) some people don't wish to be promoted (especially if relocation is involved) and b) some site managers do not want to give up THEIR treasured personnel, so will do anything within their power to undermine any such promotion efforts.

If you're able to recognize such situations BEFORE they happen, and proactively address them, you'll be much more successful in implementing your new EHS organizational structure.

For many years the argument against management systems such as ISO14001 has circled around the issue that auditors determine if your organization is conducting its processes as they are written, whether or not they are any good or are able to accomplish anything more than obtain a framed certificate. In effect, since ISO14001 and most other management systems are process-based, not performance-based, auditors may be certifying a bad system. This process versus performance approach inhibits innovation , slows the creation of business value and rarely improves environmental performance. Many (though not all) companies in the U.S. now view registration as an unnecessary, costly burden; they're dropping their registrations in record numbers.

Fortunately, the evolution to second-generation management systems auditing has begun. ISO/IEC17024:2003 now addresses the issue of auditor competency – that auditors must demonstrate competency in the industry or industries in which they are to be auditing, not merely submit paperwork qualifications that others deem adequate.

While work is continuing on the new ISO14031 performance improvement standard, auditors will continue to be barred from providing management system consulting to facilities they audit to prevent conflict of interest.

Personnel certification bodies must incorporate these new auditor competency requirements into their certification processes – for both new auditors and as existing auditors re-certify. RABQSA has taken the following approach:

 As of January 1, 2007 applications for competency-based auditor certification schemes will be accepted only; after December 31, 2009 existing auditors will have to recertify under the new schemes. RABQSA has prepared a timetable for certification transition.

 Certification will include a skill examination, an online personal attributes (PAAS) examination, an e-based training ‘gap' evaluation and new education or relevant work experience requirements; and

 Auditors must pass an e-based knowledge examination every 2 years.

Auditors should review the side-by-side comparison of the old and new auditor certification requirements that RABQSA has issued.

Although these revised auditor requirements will increase auditor certification fees slightly (about $100/year), certification will be valid for 4 years instead of 3, audit logs will no longer be used and there is no continuing education requirement. These reduced administrative efforts will more than offset the incremental increased certification cost.

While I've not yet seen ‘push-back' from the ultimate customers, those applying for system registration, there has been quite a lot from the auditing community. Auditing firms see even slightly increased costs as a problem in a shrinking, increasingly competitive marketplace. One person's article strangely took the position that it made sense for auditors to be familiar with the industry in which they are auditing for quality-related management systems but not for environmental management systems; the jargon-filled bureaucratic rant merely proves the need for such competence. I suspect that firms offering continuing education services may feel threatened also.

As with any significant move forward, however, some people and organizations refuse to ‘get with the program' and advance. They eventually get left behind. That's when management systems, and those with system registrations, will become more meaningful.

Disclosure: Mr. Rice sits on the Board of Directors of RABQSA International.

Our small production site needs sophisticated EH&S support, but not full time in all areas; are there any firms that provide ‘one-stop shopping' for diverse, ‘on call' EHS specialists?

Steve: The main sources for temporary EHS specialists are either regional offices of larger EHS consulting firms (which don't have local people with the full set of the diverse skills you need) or plain temporary staffing firms (which want to place people onsite full time over an extended period). I know of only one firm, but it provides just 2 hours of monthly telephone assistance. A quick check with about 20 of my contacts revealed one other company, but it is more oriented toward temporary project-staffing. If anyone knows of a ‘one-stop shopping' firm that specializes in providing a full stable of experienced ‘on call' temporary EHS specialists, please contact us so that we can forward it to the requestor.

This situation is a bit odd in that there seems to be a growing need (many small-mid sized sites and companies without a company or divisional stable of EHS professionals), yet no observable or known suppliers. This suggests at least three possibilities:

 No one has recognized and moved to meet the need (unlikely, I think);

 Companies have recognized and moved to meet the need, but have not found the right business model so have left this market segment (possible – a new opportunity for Environmental Opportunities, Inc.?); or

 Folks have recognized and moved to meet the need, but found it to be not financially or operationally viable due to insurance, consistency, reliability, low margins and/or other reasons (probably the most likely).

Such sites must then either a) be doing without or b) doing all the contracting on a piece-meal basis.

If any reader knows of a different possibility or has another opinion, please let us know!

Every once in a while I like to go back to a previous project and ask myself, “How did I do?” This past summer I took a day to review a futuristic business planning assignment I did a few years ago. The effort identified major environmental trends, assessed their likely outcomes and forecasted future market trends and opportunities. Pretty heady stuff that took almost a year to complete and involved well over 100 personal interviews.

All told, it listed 22 major market trends and opportunities, each with a ‘rating' like “Sure Bet”, “Jury's Still Out” or “Don't Listen To The Rabble”. I've looked at the list over the years to track its accuracy, which has been running about 80% dead-on, 10% still developing and 10% miss. What struck me last month was how significant and relevant two of the findings have been:

 Major storms (short term) and rising sea levels (long term) pose major threats to the Gulf Coast , particularly low-lying areas; such an event could disrupt production and raw material supplies for an extended period. While the focus was on certain industrial facilities and areas, Hurricane Katrina has shown that proper facility planning, protection and response can minimize business operations, supply and distribution interruptions.

 Solar energy will expand significantly, especially in locales with no existing energy infrastructure. Most of the growth will be in photovoltaic electricity generation, rather than solar-thermal dish (mirror) generators. Even though we stated in May that high oil prices didn't appear to be having much short-term impact on alternate energy markets, Hurricane Katrina has changed that. Now, according to In Business magazine, an industry that has had too many panels and too few customers is now in a position of having too many customers and too few panels. Also, The New York Times has reported a sharp increase in venture capital investment; Business Week also recently indicated that solar-thermal dish technology got a boost when Sterling Energy announced a major project in the Mojave Desert for Southern California Edison.

Futuristic business planning is productive and provides value, but only if the efforts are taken seriously and the organization (whether company or government) works to implement the resultant recommendations. It only takes one “Whew!” to drive home the feeling that all the time, effort and expense were worthwhile – will your company say “Whew!” or “Ouch!” in the future?

Steve Rice (973-966-5505) is president of Environmental Opportunities, Inc. , a strategic EH&S management and project support services company in Florham Park , New Jersey . He has 30 years of executive EH&S leadership experience, including 25 years with both Exxon and BASF, is accredited by BEAC as a Responsible Care Management System Ò (RCMS Ò ) Auditor, and serves on the Board of Directors of RABQSA International. He also authors The EHS2 Advisor column, which appears quarterly in Careline magazine and contributes to Corporate Environmental Strategy Journal.

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